The Economic Justification for Rising College Costs

by Kristin Knepper

It cannot be argued that the average cost of tuition is rising more rapidly than the inflation rate. What can be argued, however, is the cause of rising tuition. While many sources claim the rise in cost is attributed to cuts in government aid, this is false. In fact, “such spending has increased at a much faster rate than government spending in general. For example, the military’s budget is about 1.8 times higher today than it was in 1960, while legislative appropriations to higher education are more than 10 times higher.” (Campos, 2015).

The true attributions for higher tuition are higher demand, government spending, subsidies, and third party lending. Government aid and subsidies, as previously shown, has only increased for higher education. The average number of Americans enrolled in graduate, undergraduate, and professional programs has increased at an alarming rate, almost 50 percent since 1995 (Campos, 2005). Higher demand leads to higher prices. Government subsidies are increased because of increased demand (why people support candidates like Bernie Sanders is a whole other article).

Higher demand, costs, and government subsidies lead to more loans. If there’s one thing millennials like myself have been warned of, it’s repaying college loan debt. However, the increase in third party lending continues, and the class of 2015 average student loan debt is $35,000 (Sparshott, 2015). More loans and subsidies create the same problem we have in the healthcare market today: price indifference. Consumers don’t care about how much they’re paying because it’s at a discount or the price won’t be paid until later.

So here, we see the many influences of the rising US college costs. The best way to fix the system is to do the opposite of what we’ve been doing: ease up on government subsidies and let the market for higher education reach equilibrium. Consumers will be more sensitive to the cost of college, balancing demand and reducing prices.

 

Works Cited

Campos, Paul F. "The Real Reason College Tuition Costs So Much." The New York Times. The New York Times, 04 Apr. 2015. Web. 02 Apr. 2016. <http://www.nytimes.com/2015/04/05/opinion/sunday/the-real-reason-college-tuition-costs-so-much.html?_r=0>.

Sparshott, Jeffrey. "Congratulations, Class of 2015. You’re the Most Indebted Ever (For Now)." WSJ. N.p., 08 May 2015. Web. 01 Apr. 2016. <http://blogs.wsj.com/economics/2015/05/08/congratulations-class-of-2015-youre-the-most-indebted-ever-for-now/>.

Graphic: http://www.thefederalistpapers.org/us/hilarious-meme-shows-how-silly-bernie-sanders-promises-really-are